Gaurav Chopra, Founder, Indialends
Driven by technology, the consumer lending landscape in India is rapidly changing for the better. Credit is becoming easier and more inclusive, accommodating a greater number of underserved categories every day. As new initiatives spring up in a dynamic marketplace, it is the customer who is in the position to gain the most.
The Thriving Digital Opportunity
India is a country where the Internet and smartphone penetration has grown manifolds in the last few years. Today we are close to quarter of a billion smartphone users, and half a billion Internet users. As the populace has become more tech-savvy, e-commerce over the years has helped familiarize people with digital transactions. The recent surge in e-wallets and digital payments post demonetization has also added immensely to the growth of the digital economy.
The falling cost of Internet, and the increasing number of smartphone users have enabled the common man to transact on the go. Majority of online transactions today happen via smartphones; it is no longer dependent on hard lined Internet and a computer fixed on a desk. What is also noteworthy is that even though the growth in the digital economy has so far been driven by tech-friendly people in urban areas, it is the rural areas that the growth in the future will majorly come from.
What has also played an important role in this growth is the digitization of the banking system with the times. The government and the banks have been trying to get users to switch to Internet banking lately, with the aim of making the entire banking process paperless and presenceless. With initiatives like Jan Dhan, Aadhar, and IndiaStack, the government has been laying the framework precisely for this.
IndiaStack: Laying Down the Infrastructure
Building a digital infrastructure as unique as IndiaStack can have a massive impact on the future growth of the digital economy. It provides a centralized framework that consists of people’s universal biometric digital identity, allowing for a paperless and cashless existence, and enabling a consent-based free movement of data. This can be immensely helpful in the scalability and efficiency of the ventures that currently exist in the digital space. It also opens numerous avenues for new ventures to spring up in the fintech space, making services like consumer lending more accessible to the common man.
Leveraging Big Data for Better Credit Risk Models
In a country like India, one of the primary challenges that any financial institution faces is that of getting an individual’s wholesome financial profile. Traditional institutions so far have relied upon credit bureaus and their own data, both of which have their own limitations in terms of the segments that can be served. However, the increasing Internet and smartphone penetration has provided never seen before opportunities, by generating mines of data. It is this data that enables digital lending marketplaces like IndiaLends to build credit risk models that are superior to what traditional financial institutions rely on.
These advanced models not only help us manage risk better, but they also enable us to be more inclusive in terms of the segments we cater to. This approach enables IndiaLends to cater to segments that are otherwise underserved currently; segments such as individuals who are new-to-credit, looking for small amount loans, and those from low-income segments.
Promising Times Ahead
With the changing consumer lending landscape, we have already come a long way from the time when getting a loan or a credit card was a complicated and time-consuming process. As far as an everyday customer experience is concerned, the process can be made even more efficient and rewarding.
There are still many segments that stand to be catered to by banks and NBFCs. More advanced credit risk models are likely to help us provide better loan terms, and a more efficient framework, to currently existing customers. It would also help us expand the financial umbrella by covering the uncatered segments as well.